Friday, January 28, 2011

Thin Air Manifestation

Feeling like a bread man?

Yup, that is the new Corporate Economic Plan. Allow me to explain and translate, because you really need a translator for these Tweets. It all started with USAToday, whom I have no complaint with. They provided you with sound bites, headlines and not much substance. Now you get the TWEET, with no substance and think you know it all. So, let's dissect today's biggie in the world of finance.

The banks are screaming bloody murder because the FED is prepared to clamp down on the amount of money they can charge a MERCHANT to process a Debit Card. The single transaction fee for a swiped debit card not using the key pad (and small stores can't afford one) can be FORTY TWO CENTS plus 1.4% or more of the total purchase.

Bank of America and Chase are screaming they will lose 60 BILLION dollars if this measure goes into effect. They will have to raise all their rates to make up for the loss. Executives may actually have to buy American..
Pardon the lack of tears in my eyes.

Now, let me give you an example from this weekend. A customer bought less than 1.50 of merchandise and put it on her debit card. Like most small merchants, I can't afford to buy a key pad. The total fees for that single transaction would be about 45 cents, so the amount the store gets is $1.05. Now, if the merchandise was keystone, the total profit in that sale should be 75 cents but now the merchant (me) is really making 30 cents, less than half what I should be making. Now do you understand why so many small businesses are going under? I cannot refuse to accept a debit card and I cannot set a minimum purchase for using one or I lose my Merchant Account.

Now, where do you think that 60 billion dollars comes from that the banks are going to lose? YOU! You are paying for that 60 billion dollars with every purchase you make whether or not you have ever used a Debit Card. Do you like those rewards? Do you really think you aren't paying through the nose in higher end costs to get them? It would be cheaper to buy whatever the reward is. You have been hoodwinked by these banks. This money they are making doesn't manifest out of thin air. YOU ARE PAYING IT.

Now, let's look at how much it costs a bank to process a Debit purchase verses a credit card purchase. Don't just sit there like a bump on a log; keep looking! Can't find anything? You are 100% correct. The Debit Card purchase is completely risk free for the bank because the money comes out of your checking account. You can't default on a Debit Card. If someone uses yours, you will find out very quickly how good that guarantee that is supposed to protect you really is.

Not only that, but all of this is done electronically and last time I checked, electrons didn't even make minimum wage, worked 24/7 and had no insurance. Your customer service is in Pakistan where people are making a couple of dollars a DAY and they want you to believe the nasty old FED is about to cost you money. They are the ones costing you money and these fees are just one of the many total profit schemes they came up with to pad their million dollar a year bonuses and salaries that YOU ARE PAYING!

Friends, almost all banking is done electronically. Literally billions of transactions occur per day without a human ever touching them. You sit at your computer, you fill in how much money to send to whom and the money transfers electronically into the big accounts. No human required. Why are you paying so much more in fees today than you were years ago when you had to write a paper check, mail it to the person, who took it to their bank and gasp...no ATM...took it to a teller (real live breathing person) who then manually...no scanners...typed all the information into a ledger to deposit that check which was them bundled up with a bunch of checks from the same issuing bank...by a person....mailed to that bank....where a PERSON checked each bank account to make sure the money was there and physically debited the money from the individual account AND then communicated with a real human in your bank that the money now available to be put in your account by another HUMAN? Wow...that's the longest compound sentence I have ever written. Well, for a start...bank presidents didn't make 3 to 4 million dollars a year in salary with million dollar bonuses.....This profit is not manifesting out of thin air, it is coming right out of your pocket. You are paying these people to figure out better ways to pick your pocket.